I was talking  to a friend recently about an old colleague of ours from many years ago who has gone on to be one of the best known and successful CEOs in the FTSE 30.  He turned around a real struggling household name company, not by any super–complex strategies, but by getting the basics right; pricing, staff motivation, supply chain and marketing, all done in a very pragmatic manner.

One step he took was to get out of a major outsourcing contract that his predecessor, a high powered, knighted,  city-connected gentleman had got the firm into.  And that outsourcing deal was done on the proverbial (or maybe the actual) golf-course.  I saw the contract a couple of years into the deal and my goodness, it looked like it was done on the golf course, or perhaps in the bar afterwards over a couple of G and Ts (no ladies in the bar please, jacket and tie at all times).

Some of the Ts and Cs were almost laughable; it was a truly lousy deal for the customer.  All because, I would surmise, of the lack of any competitive pressure on the provider.  Single source = poor value (in most cases) is a pretty good rule of thumb.

So I very much enjoyed this piece by Esteban Herrera on the Horses for Sources site.  Esteban points out that single source can be bad news for the provider as well, which I must admit I hadn’t really thought about.  But I suspect he is right, although I still think I would rather be the provider than the buyer in such situations….An interesting and enjoyable read anyway, and he manages to work in a picture of LIndsay Lohan as well (was that an office bet I wonder?)

Anyway, you know it makes sense; for outsourcing and most other stuff.  Compete it.

Not for readers of a nervous disposition…

Have some sympathy for Jason at Spend Matters.  Not only do I get bragging rights for the next two years following Europe’s humiliation  of the USA (OK, hair’s breadth victory) at the Ryder Cup, but he suffers this on his United Airlines flight.

I don’t perceive that Fieldglass are quite as well known in Europe as in the US, but the Chicago venture capital firm, Madison Dearborn, has acquired a majority stake in them, valuing the firm at $220 million and paying a multiple of over 6.5 x sales; a price that I suspect some other supply chain software firms will look at somewhat longingly!  Who are Fieldglass?  As the press release says;

Fieldglass’ Software as a Service (SaaS) Vendor Management System (VMS) enables companies to more efficiently procure and manage contingent labor and services such as statement of work engagements, offshore projects and independent contractors across dozens of categories,

Jason at Spend Matters has regularly written about Fieldglass and this market sector in some detail, and he has covered this latest development with insightful comment as ever, so if you’re interested and / or Fieldglass are a supplier, its worth having a look here and here.

(Procurement) Problems in Paradise?

The Honolulu Star Advertiser reports that it is illegal for Hawaii to stipulate quotas for employing local workers to suppliers bidding for work:

The U.S. Department of Housing and Urban Development says a law that requires local residents get 80 percent of the jobs on state and county construction projects violates its procurement rules, the Governor’s Office said today.

The Governor, Linda Lingle, who opposed the idea anyway, sounds like a lady who understands procurement and economics.   “In addition to the legality of an ambiguous residency quota and procurement preference, I vetoed these measures because they discourage job creation, delay and increase the cost of public construction projects, and stall our economic recovery.”

Renault and Nissan announce more co-operation

The Nikkei Business Daily, reported by Reuters, says that:

The companies plan to design a common platform for midsize sport utility vehicles and sedans, and also plan to standardize 70 key components — including windows and brakes — that make up about 80 percent of the total cost for parts and materials..

There are ambitious cost saving targets; “the companies expect to cut parts procurement costs for midsize vehicles by about 30 percent, or several hundred billion yen a year, through bulk purchasing…”

That seems a very large saving given that each firm must have considerable economy of scale itself ? But I guess the standardisation process might generate much of that benefit, irrespective of the additional collaborative leverage.  Aggregating demand clearly has much more potential benefit when specifications are also aligned.  Supplier risk management will also of course be even more important for the participating firms as critical suppliers become even more critical.  Remember this?

New Zealand government looks to invest in eProcurement

Stuff website in New Zealand reports that a “major revamp of a government procurement website will cut the costs and time involved in bidding for and awarding contracts, the Economic Development Ministry says.”

The NZ government are going to the market early next year to look for a new public procurement platform; it sounds like they want something that provides both a ‘portal’ for advertising government procurement opportunities and a tender evaluation tool, with some standardisation of approach built in.  I can think of a few suppliers who might be interested; but when the client says “can you pop in for a quick chat about your proposal…”  -  it’s a long way!

I’ve been intending to cover this for a few days and now Jason has beaten me to it.  So my first task is to refer you to his learned post here.

IBM and a bunch of other blue chips (Bank of America, Citigroup, Pfizer and UPS) have announced Supplier Connection, a small business registration site for suppliers who want to work with the participating giants.   According to Supplier Connection’s website, the online service is expected to go live “during the first quarter of 2011.”  It sounds good in some ways, and as a small supplier myself, I see the benefit in that single approach.  It seems a little strange to announce now though, months ahead of it going live – I wonder why?  And as Jason says, good for them that they have had a grant from the non-profit IBM International Foundation …but this is a competitor to a number of other services, who may feel a little annoyed that a ‘charity’ is funding that?   In the UK (and beyond) for example, Achilles have a strong position in terms of pre-qualification and supplier information in many major industries; a service that includes serious verification and accreditation.

And at the moment it is unclear from the Supplier Connection website how those two critical elements (verification and accreditation), let alone selection, might work – supplier registration is frankly the simple bit, and but the first of several key process  steps to small suppliers actually winning business.

But might this also be of interest to the UK Government (particularly if IBM are funding it)?  There has been much talk of a single registration service for firms bidding for Government work.  It sounds such an obvious and simple idea – but as I know from experience it is one of those concepts that gets more complex the more you get into the details.  How do you verify information?  Who is responsible for keeping it up to date?  How does qualification for bids, let alone actual supplier selection work?

Anyway, we will keep watching this as it develops I’m sure.

After long negotiations, fees to advisers that run into the double digit (yen), and a bid rumoured to be well into the realms of a bottle of really quite reasonable pinot grigio, nothing special but drinking quite nicely, the Procurement Excellence Blog has agreed to team up with what is (in all seriousness) probably the world’s most successful procurement and supply chain website / blog, SPEND MATTERS.

Spend Matters has created a whole new type of ‘product’; combining elements of publishing, analysis (cf Gartner), opinion and consulting / education type advice.  It has many thousands of regular readers, in the US and globally, and has become a serious opinion-former around procurement issues, technology and services.

Jason Busch of Spend Matters was one of my inspirations behind me starting this blog, and having got to know him over the last few months he is an excellent and impressive guy.  Apart from the fact he is younger than me by some distance, smarter, taller, slimmer, fitter (runs Marathons etc), more productive (son number 3 on the way),  can write 10,000 words of intelligent procurement content in a day, and plays the bass guitar better than me, I really like him…

What do I have to offer? Well, I know more about RAWWCKK music than him.  I suspect I’m still a better soccer player despite my advancing years (Americans – what do they know about football, eh?).  And I think I own more wine than him.  OK, that’s about it really.

So…in early October we are launching “Spend Matters UK: Europe (incorporating Procurement Excellence)”.

We will build on the Spend Matters US (and global) readership and reach, along with our Procurement Excellence (much appreciated) regular readership!  I will obviously be writing, Jason will also write some specific pieces for the new site,  we’ll have some US Spend Matters material re-focused on Europe, and interesting guest writers.  If you know Spend Matters you will appreciate that Jason has an incredibly strong understanding of procurement and supply chain technology, so look out for real insight in that area.

We’re really excited about this; but let me just give you one assurance.  We ‘ve agreed that we will continue to write about music and occasionally other non-procurement stuff.  Indeed, if you read Spend Matters, you will know that they are not averse to the occasional rather ‘leftfield’ post, and our shared sense of humour was a key element in our deciding to team up in this way.  So we won’t lose anything that you might enjoy about Procurement Excellence; but you should get a whole lot more in addition.

Finally, we are looking for sponsorship of the site (as per Spend Matters in the US).  I’ll say more about that tomorrow, and we already have a number of sponsors lined up, but if anyone else is interested in reaching a very high quality procurement readership, and gaining other benefits from working with Jason and I, please drop me an email on psmith@procurementexcellence.com.

We have an interesting story here from India (India Everday / NDTV website).  The Indian Railways are according to some sources paying way over the odds for routine goods supplied by vendors who have got onto ‘approved supplier’ lists.  Is it corruption – or is it just bureaucratic incompetence?  Or a consequence of using poorly thought out specifications and uncompetitively managed frameworks?

New policies for US defence procurement were announced on the 14th September by Defence Secretary Robert M Gates in “a move aimed at creating greater efficiency and productivity in defense spending”. It may take me a while to read them but I will come back to this if there’s anything interesting or noteworthy to discuss.  And probably as usual be taking claims of huge future ‘procurement savings’ with a very large pinch of salt….

And finally… Cap Gemini are the second firm to announce that they have signed a memorandum of understanding with the UK Government after negotiations as part of the ‘immediate cost savings from top suppliers’ initiative.  They also announced a profits warning after they were forced into offering  up millions of pounds in savings that:

“All existing contracts remain and continue to be delivered as planned. Capgemini has also presented a range of new business opportunities to enable the commitment of savings to HMG.”

My blogging friend Jason Busch is at the Emptoris Empower 2010 Conference in Boston.  I am very jealous as Boston is one of my three favourite cities I’ve ever visited, their weather is good apparenetly, while we seem to have slipped firmly into Autumn (Winter?) here in England.

Anyway, Jason is posting from the conference, and here are his initial background piece and his latest commentary on the event so far and the business update Emptoris has announced.

And the numbers Emptoris have released look pretty impressive (at first sight at least): according to their press release,

Emptoris, Inc., a leading provider of strategic supply and contract management solutions, reported today that the company has recorded record sales bookings growth of 91% during the first half of 2010 compared to the same period in the prior year.

They’ve also announced three new senior level recruits, and Jason confirms that they have got a pretty impressive group of around 300 customers together for the event, with good numbers of CPOs and CTOs amongst them.  They planned a European event earlier this year which was cancelled because of the Volcanic Ash (remember that – all seems like a bit of a dream now doesn’t it?)  So it’s good to know Boston hasn’t been interrupted by plagues of locusts or whirlwinds…

More later in the week and do have a look at Spend Matters for further detail and insight.

We featured (with some real sense of enjoyment, I’m slightly ashamed to say) the goings on with Mark Hurd, the didn’t-have-sex scandal, his departure from HP.  Now Larry Ellison of Oracle, who was outspoken in his criticism of HP at the time, has put his money where his mouth is and engaged Hurd.  As the press release announced;

“Oracle today announced that Mark V. Hurd has joined Oracle as President and has been named to Oracle’s Board of Directors.  Mr. Hurd will report to Oracle CEO Larry Ellison”.

HP has responded immediately with a civil complaint, filed in the California Superior Court. It claims Hurd will “inevitably” disclose trade secrets in his new role at Oracle, violating the non-disclosure agreement he signed with HP prior to resigning from the company in August. The suit seeks injunctive relief and damages, as well as an order that would prevent Hurd from accepting a position with a competitor

Ellison responded with this.

“Oracle has long viewed HP as an important partner,” said Oracle CEO Larry Ellison. “By filing this vindictive lawsuit against Oracle and Mark Hurd, the HP board is acting with utter disregard for that partnership, our joint customers, and their own shareholders and employees.  The HP Board is making it virtually impossible for Oracle and HP to continue to cooperate and work together in the IT marketplace.”

Boys! Play nicely!  That certainly doesn’t sound like the words of someone who sees HP as a ‘partner’; they appear more like the stance of an aggressive competitor. And perhaps that is where Ellison sees Oracle going.  Oracle signaled their intent to move into hardware with their acquisition last year of Sun Microsystems.  Now, by taking on Hurd (assuming that appointment holds), who is very much a hardware man, and picking a fight with HP, Ellison would seem to be taking them further in that direction.

I’m sure we’ll come back to what all this means for the supply chain and procurement technology world, but one immediate thought; SAP must be sitting in Walldorf, Germany, well away from this Californian madness, and chuckling to themselves at all this. As the NY Times reports, Bill McDermott, a top man at SAP,  says SAP is “staying true to its core” in software.

As Oracle’s biggest software rival, a major falling out between HP and Oracle is only likely to strengthen their position.  There may be other winners, including smaller more specialist solution providers who go up against Oracle in the procurement space, and of course large HP services competitors such as IBM and Accenture, but SAP may have most to gain.  And if Oracle get distracted by a noisy court battle that could go on for months or even years…. then even better.

While we’re still in the enthusiastic, weather still good (well…), back to school mood, our next ‘New Year’s Resolution’ is to stand back and take a hard look at your current and future strategy around procurement-related technology.

Since I got into this blogging thing, and made a conscious effort to get more up to date with this whole area, I’ve bean amazed by how much things have progressed in the few years since I had a more direct interest in running procurement functions (as a full time then interim CPO).  It really is worth making sure you’re up to date.

So for some organisations, reviewing your current opportunities may mean looking to take first steps into real ‘eSourcing’ or P2P automation.  For others who are already well advanced on the journey, it means reviewing recent market developments to ensure you’re remaining at the leading edge.

Spend Matters published this a few weeks back, which I thought proposed a very good way of classifying procurement and supply chain technology into three high-level sectors or “uber-segments” as Jason called them:

1. Supplier information management – incorporating supplier enablement, performance management,  risk, and spend analysis (which could arguably be seen as a separate ‘uber-segment I guess).
2. Next generation sourcing / collaborative sourcing – which includes the well-known strategic sourcing toolsets from vendors including Ariba, Intenda, Emptoris, BravoSolution, Iasta etc; sourcing decision support (e.g. optimisation), marketplace offerings, and also commodity strategy / trading type technology in more specialist categories.
3. Finance-driven purchasing; including ERP systems, but also technology supporting working capital and treasury objectives.  Jason points out that this sector is very  dynamic, and that the dominance of traditional ERP providers is perhaps not as embedded as you might think.

So, we can’t generalise about what the right strategy is for any particular organisation, but why not take the opportunity this Autumn to review where you are, where you want to be, and how technology across these three sectors can help you get there.  And Spend Matters and Procurement Excellence will do what we can to help – without pretending we have all the answers!